Canadian Natural Gas Declines as Mild U.S. Weather Pares Demand

Canadian natural gas fell as mild U.S. weather pared demand and additions to stored reserves of the fuel exceeded analyst expectations.

Temperatures in Chicago may reach 70 degrees Fahrenheit (21 Celsius) May 9, 1 degree above normal, according to State College, Pennsylvania-based AccuWeather Inc. U.S. gas stockpiles rose 72 billion cubic feet last week to 1.76 trillion, compared with analysts’ expectations of 67 billion cubic feet, the average of estimates compiled by Bloomberg.

“We expect North American gas to be oversupplied for the next two to seven years,” Steve Laut, president of Canadian Natural Resources Ltd., said yesterday. Canada’s second-largest gas producer will increase spending on more profitable oil and natural gas liquids this year, he said at the company’s annual meeting in Calgary yesterday.

Alberta gas for June delivery fell 3.75 cents to C$3.4925 per gigajoule ($3.42 per million British thermal units) as of 2:05 p.m. New York time, according to NGX, a Canadian Internet market. Gas traded on the exchange goes to users in Canada and the U.S. and is priced on TransCanada Corp.’s Alberta system.

Natural gas for June delivery on the New York Mercantile Exchange fell 2.5 cents to $4.236 per million Btu as of 2:24 p.m.

Gas for prompt delivery fell as mild weather forecast in the U.S. next week is likely to pare air-conditioner use.

Delivery Point Prices

Gas at the Alliance Pipeline delivery point near Chicago dropped 30.49 cents, or 6.6 percent, to $4.2098 per million British thermal units on the Intercontinental Exchange. Alliance is an express line that can carry 1.5 billion cubic feet a day to the Midwest from western Canada.

At the Kingsgate point on the border of Idaho and British Columbia, gas fell 25.13 cents, or 5.9 percent, to $4.008, according to ICE. At Malin, Oregon, where Canadian gas is traded for California markets, gas was down 29.34 cents, or 6.7 percent, to $4.1193.

Volume on TransCanada’s Alberta system, which collects the output of most of the nation’s gas wells, was 15.1 billion cubic feet as of 2 p.m. in New York, 334 million below its target level. Gas production has declined in western Canada because the ground is too soft to move heavy equipment to well sites.

Gas was flowing at a daily rate of 2.58 billion cubic feet at Empress, Alberta, where the fuel is transferred to TransCanada’s main line.

At McNeil, Saskatchewan, where gas is transferred to the Northern Border Pipeline for shipment to the Chicago area, the daily flow rate was 1.88 billion cubic feet.

Available capacity on TransCanada’s British Columbia system at Kingsgate was 1.28 billion cubic feet. The system was forecast to carry 1.62 billion cubic feet today, about 56 percent of its capacity of 2.9 billion.

The volume on Spectra Energy’s British Columbia system, which gathers the fuel in northeastern British Columbia for delivery to Vancouver and the Pacific Northwest, totaled 2.96 billion cubic feet at 1:05 p.m.

(Source: http://www.bloomberg.com/news/2011-05-06/canadian-natural-gas-declines-as-mild-u-s-weather-pares-demand.html)